Skift Take

Disney is pouring money into expanding its existing theme parks, so it should come as no surprise that the company would consider building in new countries altogether. While the CEO called such a move an "inevitability," no one should hold their breath for an announcement anytime soon.

The Walt Disney Company has worlds, lands, kingdoms and resorts at points across the globe. But the entertainment giant is still on the lookout for a place to plant its next flag.

In response to an analyst question Tuesday afternoon, Disney CEO Bob Iger said during an earnings call that the company is “constantly engaging in conversations with people from different markets who would love us to put Disneyland in their market.”

He said he believes there is opportunity to expand still in China, where Shanghai Disney Resort opened in mid-2016. And the company is looking at other markets due to their population base with consideration of factors like economic and political stability, expendable income, and infrastructure in mind.

“I’d say that there’s an inevitability to us building parks in other countries, but it doesn’t necessarily mean that we’re going to build something anytime very soon,” Iger said. “But we’re going to look.”

The strength of the company’s parks and resorts business shows why it would be eager to build more outposts. For the second fiscal quarter, which ended March 31, revenue for the segment jumped 13 percent to $4.9 billion.

Operating income growth soared 27 percent to $1 billion. Company-wide, revenue was up 9 percent to $14.5 billion and net income jumped 23 percent to nearly $3 billion.

Chief Financial Officer Christine McCarthy said it was a record-setting second quarter, driven by higher guest spending and attendance at Walt Disney World Resort in Florida and Disneyland Paris, and increased attendance and occupied room nights at Hong Kong Disneyland Resort.

At domestic hotels, occupancy increased 2 percentage points to 90 percent, an per-room spending increased 12 percent. A change in the timing of Easter, which moved one week of the holiday into the quarter, accounted for about $47 million of the growth in the park, executives said.

The downside — unusually — was Shanghai Disney Resort, which saw lower attendance due to bad weather early in the quarter. That caused a decrease in operating income, but McCarthy said a recovery that started in March is expected to continue following the opening of a Toy Story Land at the property.

While the land is not as large as the one that will open at Disney’s Hollywood Studios in June, Iger said it marks “a substantial expansion of that park.”

“It makes a dent in terms of the scale of the park,” he said. “But we have ample opportunities to grow Shanghai Disneyland beyond what we’ve already built.”

One analyst wanted to know how much more growth investors could expect from the theme park segment.

“The parks have been growing operating income at, I think, a pretty healthy double-digit clip,” said Ben Swinburne, managing director and head of media research for Morgan Stanley. “Can you talk about the runway ahead for that business, whether it’s pricing power, capacity at the hotels?…When you look out over the next three to four years, assuming the economy’s OK, can you just talk about the drivers of continued growth at the levels we’ve gotten accustomed to?”

Iger said the growth will come from multiple directions: expansions at parks, new hotels around the world, additional cruise ships, and more use of intellectual property.

He mentioned another revenue generator that Disney fans will be less excited about: higher prices.

“As we build out these experiences in terms of scope and scale — but also as we make them better experiences using technology to do things like book attractions in advance — we believe that gives us pricing leverage that comes from simply delivering a better experience,” Iger said.

He added: “We feel, overall, great about the future of this business.”


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Tags: disney, earnings, theme parks

Photo credit: A 25th anniversary celebration is pictured at Disneyland Paris. Higher attendance and spending at that park and others helped drive significant revenue and operating income increases for Disney's parks and resorts division. Gilbert Sopakuwa / Flickr

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